1. Presented by:
Leena Chellani 11015
Nikunj Gajara 11046
Chandan Pahelwani 11047
Rinku Salat 11068

2. Strategic Planning Process
 Meaning of Strategic Planning
 It is the process of deciding on the programs
that the organization will undertake
 on the appropriate amount of resources that
will be allocated to each program over the
next several years.
 The document that describes how the
strategic decision is to be implemented is
the strategic plan.

3. Reviewing & Deciding on
Updating from assumptions &
last year guidelines
First Iteration
Analysis of the new
Strategic Plan
Second
Iteration of the Final review
new Strategic and approval
Plan

4. Reviewing and Updating the Strategic
Plan
 During the year, whenever there is a need
management takes decisions that change the
strategic plan.
 Actual experience is reflected in accounting reports
for first few months of current year, and these are
extrapolated further for current year as a whole.
 If computer program is sufficiently flexible, it can
extend the impact beyond the current year and if
not, rough estimates are made manually.

5. Cont…
 The implication of new program decisions on
revenues, expenses, capital expenditure & cash
flow are incorporated.
 Planning staff usually makes this update and
management may be involved if there are
uncertainties or ambiguities.

6. Deciding on Assumptions and
Guidelines
 The updated strategic plan incorporates broad
assumptions such as growth in Gross Domestic
Product, cyclical movements, labor rates, prices of
important raw materials, interest rates, selling prices.
 Market conditions such as competitors and impact of
government legislation.
 These assumptions are reexamined and if necessary,
are changed to incorporate the latest information.
 Updated strategic plan contains financial information
for new plants, existing plants and closing plants.

7. Cont…
 A rough approximation is adequate as a basis for
senior management decisions about objectives
and key guidelines are to be observed in planning
to attain these objectives.
 Objectives are stated separately for each product
line expressed as sales revenue, profit percentage
and return on capital employed.
 Guidelines are assumptions about wage and
salary increases, new or discounted product lines
and selling prices.

8. First Iteration of the Strategic Plan
 Using the assumptions, objectives and guidelines,
business units and other operating units prepare
their “first cut” of the strategic plan which includes
changes made compared to current plan, these
are supported by reasons.
 Business unit staffs do much of the analytical work,
but managers make the final judgments.
 The completed strategic plan consists of income
statements and quantitative information about
sales and production in detail.

9. Analysis
 When headquarters receives the business unit
plans, they aggregate them into an overall
corporate strategic plan.
 Headquarters examine the business unit plans
for consistency also.
 Sometimes individual plans does not add up to
attainment of the corporate objectives, which
is known as planning gap.

10. Cont...
 There are three ways to close a
planning gap:
 find opportunities for improvements in the
business unit plans
 make acquisitions
 review the corporate objectives.

11. Second Iteration of the Strategic Plan
 Analysis of first submission may require a revision
plans of only certain business units, but it may lead
to changes that affect all business units.
 Technically, revision is simpler to prepare than the
original submission but organizationally, it is
difficult because it requires difficult decisions.
 Some companies do not require a formal revision,
they negotiate changes informally and enter the
results into plan at headquarters.

12. Final Review and Approval
 A meeting of senior corporate officials usually
discusses the revised plan at length.
 The plan also may be presented at meeting of
board of directors.
 The chief executive officer gives final approval.
 The approval should come prior to the beginning of
the budget preparation process, because strategic
plan is an important input to that process.

14. Objectives of case
 To construct Value Chain Analysis
 To use value chain as a power tool
 To implement strategic plans in
accordance with the value chain

15. Dairy Pak is Ohio based international company.
 Dairy Pak began their operations in 1947 as one of the
original license of the Pure-Pak Technology.
 They focused on producing polyethylene coated paper
carton for milk and orange juice.
 Due to growing demand, it expanded its operations and
built converting plants in different states.
 During the early 1960's through 1988 Champion steadily
produced 2,50,000 tons of polyethylene coated boards
annually.

16.  During this period, the paper board industry was
threatened by the intrusion of plastic containers
but Champion did not falter and continued with its
existing operations without changes in strategy or
equipment.
 At this point, the company decided to have the
harvest strategy.
 Incidentally, the paper carton did not die, and
since there were no major changes in Champion
its infrastructure got old and technologically
outdated.

17.  In the early 1980's the sudden increase of the
juice market created opportunities which
Champion did not expect.
 In 1988 however, Champion successfully
managed to retain its share in the declining
market while losing almost half of its share in
the fastest-growing segment, the branded
juices.
 Champion strategy was to be the low cost
producer in commodity dairy segment.

18.  In 1988, the Vice President of the Dairy-Pak
Division of Champion International has to make
some tough choices. He is facing:
 Declining market share in the growing “Branded
Juice” segment of domestic paperboard carton
segment
 Their manufacturing system is old
 Limited output capability which had not grown in
10 years.
 Rapidly expanding international market which the
corporation had seen as fraught with some
problems than competitors.

19. The Competitors
 International Paper
 It was the industry leader & considered to be low cost
producer.
 It is also the most technologically advanced company.
 Champion was currently a strong number 2,
with more domestic volume.
 Potlatch, Westvaco, and Weyerhaeuser all
ranked in a third tier of competition facing
difficulties related to quality and inefficient scale.

20. The Pure-Pak Customers
 Domestic Dairies- The diary’s product was usually a
commodity that achieve price premium for brand
name.
 Differentiated Juicers- This was the fastest growing
segment in liquid packing in 1988.
 Special Uses- This market had grown slowly, volume
per customer was very low it was 4% of Champion’s
volume.
 Export Market- The fourth group of customers for the
Pure-Pak carton was the export market.

21. Pulp
Process
Flow Paper Mill
Extruder
Conversion
Regional Orange Minute
Diary Juice Maid
Processor Processor Processor
Super Markets &
Distributors
Customer

22. Champion’s Market position
Domestic Consumption of Pure-Pak Cartons (000)
1980 (tons) 1987 (tons) % change
Dairy 506 374 -26%
Non Dairy 66 120 +82%
Total 572 494 -14%
Champion’s Domestic Pure-Pak Cartons
1980 (tons) % share 1987 (tons) % share
200 39% 150 40%
30 46% 30 25%
230 40% 180 36%

23.  For the purpose of competition and to invest,
Earle Bensing’s first proposal was to renovate
paperboard machine.
 Second proposal was to add a third extruder at
the Waynesville, North Carolina plant.
 Third was to add roll wrapping equipment at the
Waynesville location.
 Fourth potential area for investment was adding
rotogravure printing.

24. Q&A

25. A process flow value chain
Regional Dairy Branded OJ
MILK OJ MM/CH TROPICANA
Consumer Pays 1.16 1.50 1.89 2.26
Store pays 1.04 1.20 1.42 1.79
Store Margin 0.12 0.30 0.47 0.47
Dairy pays 0.75 0.80 0.64
Shrinkage 0.06 0.06 0.11
Pasteurising/advertisin 0.06 0.06 0.36
g
0.87 0.92 1.11
Carton cost 0.08 0.08 0.06
Cost to dairy 0.95 1.00 1.17
Dairy/juice margin 0.09 0.20 0.25

26. Computing the margin in value chain
milk orange
Manufacture’s margin 0.08 0.06
For 14400 tons 1152 864
Processing cost
Cost of transport 10 10
Printing 231 231
Cost of buying roller 663 663
Total processing cost 904 904
Margin processing 248 -40
Extrusion cost
Price of roll 663 663
Transport cost 35 35
Cover roll 94 94
Cost of buying rolls 530 530
Total cost of roll 659 659
Margin extrusion plant 4 4

27. Mill SP to customer 530
Cost
Pulp 319
Machining 105
Freight to customer 47 471
Mill margin 59
Extruder cost
Transfer cost :
Mill cost
Pulp 319
Machining 105
Freight to extruder 3
Mill margin 59 486
Other costs 94
Freight to converter 35
615
Extruder margin -22

28. Q-2 & Q-3
Milk
Margins Assets ROA
$ $ %
Super Market 1728 1800 96
Dairy/ Juices 1296 5400 24
Converter 318 830 38.3
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 3379 11020 30.7

29. Orange Juice
Margins Assets ROA
$ $ %
Super Market 4320 1800 240
Dairy/ Juices 2880 2890 99.7
Converter 318 830 38.3
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 7555 8510 88.8

30. Branded OJ
Margins Assets ROA
$ $ %
Super Market 6768 1800 376
Dairy/ Juices 3600 2890 124.6
Converter 30 830 3.6
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 10435 8510 122.6

31. Buyer Power Analysis
Base Commodity Branded OJ Products
Dairies
Buyer Concentration (No of 1000 3
buyer)
Size of Buyer as a Relatively small Same size as paper board
corporation manufactures
Buyer Switching Cost Low, but High, but differentiated board
commodity board
Ability to backward integrate Nil Nil
into paperboard
Substitutes (Products) Plastic, other? Plastic, glass, other?
Cost of Carton/ Total Cost 0.08/0.95 =8.42% 0.06/1.17 = 5.13%
Buyers Margin 0.09/1.04 = 8.65% 0.25/1.42= 17.6%
Champion’s ROI 9.3% 1.75%